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Nabisco head likely to take over at IBM: Choice would speed up devolution

NEW YORK - IBM is expected to announce next week that it has chosen Louis Gerstner, a financial manager with experience in cost-cutting, divestiture and decentralisation, to take over as its new chief executive.

Computer industry officials said they understood that the selection of Mr Gerstner, reported in yesterday's Wall Street Journal, is to be approved by IBM directors when they meet next Tuesday in New York.

Details of his contract have not yet been settled, but it appears that IBM has decided to choose a professional manager with no direct industry experience, rather than appoint an insider or one of the two industry executives it has been considering, Morton Meyerson of Perot Systems and Paul Stern of Northern Telecom.

Mr Gerstner, 50, is currently chief executive of RJR Nabisco, the foods-to-tobacco giant made private four years ago by the leveraged-buyout specialists Kohlberg Kravis Roberts. To pay for the dollars 25bn ( pounds 17bn) transaction, Mr Gerstner was brought in by KKR to sell off large parts of the company and cut overheads.

A former president of American Express and a one-time McKinsey consultant, Mr Gerstner has also transformed RJR Nabisco's corporate structure, delegating operational responsibility to the managers of each of its main divisions.

Computer industry analysts say the choice of Mr Gerstner confirms that the directors have decided that nobody can run IBM in its current form, and that its devolution into a series of smaller companies will have to be accelerated. Under John Akers, its current chief executive, the company embarked on the first stage of this decentralisation, splitting into 13 operating divisions.

'IBM has decided that it will be a collection of little IBMs in the future,' said David Wu, an analyst with SG Warburg in New York. 'Once they've made that decision, Lou Gerstner is the logical choice.'

Mr Gerstner can be expected to sell some IBM divisions and spin off others as free- standing companies. One of his challenges will be to appoint the right heads for the groups, some of which are growth businesses and others in declining markets. He will have to replace traditional IBM general managers accustomed to reporting to a central management with more entrepreneurial chief executives.

While Mr Gerstner had some experience with information technologies at American Express, the task of re-shaping, or even dismantling, IBM will require management expertise rather than technological vision, analysts argue.